International Test

For each of the following questions, select the choice that BEST
corresponds with the answer. You will receive 10 points for
each correct answer; 5 points will be deducted for each incorrect answer. Points
will be neither awarded or taken away if you do not attempt to answer a question.

1. If Americans decide to buy less Japanese automobiles,

the demand for Japanese yen will shift to the right

the demand for U.S. dollars will shift to the left

the supply of Japanese yen will shift to the left

the demand for Japanese yen will shift to the left

the supply of U.S. dollars will shift to the right

2. Does Cuba, a non-capitalist nation, produce capital?

No, it must import it from capitalistic nations.

No, it doesn't have a stock market.

No, it is not needed in a planned economy.

Yes, but it is owned and controlled by the state.

Yes, but it is used only to trade for natural resources which Cuba doesn't have.

3. According to the principle of comparative advantage, worldwide output and consumption levels will be highest when goods are produced in nations where which of the following is true?

Opportunity costs are lowest.

Absolute advantages are highest.

The balance of trade is in a surplus position.

The exchange rate is falling.

The exchange rate is rising.

4. Trade between countries leads to

reduced labor productivity

increased interdependence

higher product prices

job losses in at least one of the countries

decreased amounts of products in at least one of the countries

5. An increase in U.S. tariffs on foreign-produced steel would probably benefit all the following groups EXCEPT

domestic steel producers

U.S. steelworkers

users of domestic steel

domestic iron ore producers

businesses in steel-producing areas

6. With freely floating exchange rates, a decrease in the value of a nation's currency will

cause an international shortage of its currency

contribute to disequilibrium in its balance of payments

cause its imports to fall

cause gold to flow out of that nation

cause the value of other nations' currencies to also decrease

7. When does the law of comparative advantage indicate that mutually beneficial international trade can take place?

When tariffs are eliminated

When transportation costs are almost zero

When relative costs of production differ between nations

When a country can produce more of some product than other nations can

When a country can produce a product in less time than another nation can

8. What can an increase in U.S. interest rates be expected to do?

Adversely affect U.S. importers

Encourage investment spending by U.S. firms

Decrease the international value of the dollar

Cause a net outflow of foreign capital from the United States

Increase the international value of the dollar

9. The table below gives the number of tons of widgets and cogs than can be produced in Country X and Country Y by using the exact same amount of productive resources:

Widgets

Cogs

Country X

10

5

Country Y

8

2

The theory of comparative advantage suggests that under these conditions, Country Y would find it advantageous to

export widgets and import cogs

export cogs and import widgets

export both widgets and cogs and import nothing

import both widgets and cogs and export nothing

neither export nor import either widgets or cogs

10. A barrier to trade in the form of laws forbidding trade in certain goods is called

a tariff

an embargo

a quota

an import tax

a voluntary restraint agreement

11. In Adam Smith's view of capitalism,

having a few large corporations would be more efficient than having many smaller firms

a country should emphasize exports over imports to enhance its wealth

people, acting in their own self-interest, unwittingly do good for others

the government should play a major role in allocating resources

specialization would lead to worker alienation, not increased productivity

12. Which of the following economic questions must all societies deal with?

What goods will be produced and in what quantities?

How can markets be kept competitive?

How can the problem of scarcity best be eliminated?

What will ensure income is distributed equally to all members of society?

All of the above

13. What does a balance-of-trade surplus imply?

Merchandise exports exceed merchandise imports.

Merchandise imports exceed merchandise exports.

Exports of services exceed imports of services.

Imports of services exceed exports of services.

Investment by foreigners exceeds domestic investment in other countries.

14. Which of the following would contribute to a U.S. balance-of-trade deficit?